August 26, 2017 / 3:14 PM / a month ago

Consumption seen fueling Brazil's recovery, Goldfajn tells paper

FILE PHOTO: Containers are seen during a workers' strike at Latin America's biggest container port in Santos, Sao Paulo state, Brazil, September 14, 2016. REUTERS/Fernando Donasci/File Photo

SAO PAULO (Reuters) - Household spending has given a surprising boost to Brazil’s economic recovery after a dramatic slowdown in inflation, Central Bank President Ilan Goldfajn told Folha de S. Paulo newspaper in an interview published on Saturday.

A year ago, policymakers were convinced that investment would help pull Brazil out of its worst recession in more than a century, Folha said. The outlook changed, however, as the lowest inflation in 18 years has helped consumers resume purchases of goods and services, Goldfajn told the newspaper.

Although accusations that President Michel Temer had worked to obstruct a corruption probe triggered some turmoil, they had only a slight effect on the recovery, Goldfajn said. Temer has denied repeatedly any wrongdoing.

“It’s evident that the worst was left behind,” Goldfajn said. “The only doubt lies on the pace of a recovery. Will it be faster or slower?”

Annual inflation through mid-August is running at 2.68 percent, far below the 4.5 percent midpoint of the central bank’s annual target. Such a reading is supporting bets of a sharp rate cut at the central bank’s upcoming September meeting.

Efforts to confirm Goldfajn’s comments to Folha were unsuccessful.

Because the government is clearly committed to tightening expenses, its recent decision to widen a budget deficit target for this and next year is unlikely to trigger further uncertainty, Goldfajn told Folha.

Reporting by Guillermo Parra-Bernal; Editing by Lisa Von Ahn

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